In­vestors tem­per Africa ex­pec­ta­tions

NEW YORK — Just a year ago, Africa was touted as the next in­vest­ment El Do­rado. Two decades of record growth, a rapidly ur­ban­iz­ing pop­u­la­tion of 1.1 bil­lion, ris­ing in­comes and vast un­tapped min­eral re­serves would lead to the cre­ation of a broad mid­dle class, the the­ory went.

Now a slow­down in China, Africa’s largest trad­ing part­ner, a com­mod­ity price rout and a power short­fall are sep­a­rat­ing the losers from the win­ners. The MSCI EFM Africa In­dex of shares has dipped 18 per­cent this year, five per­cent­age points more than a gauge of stocks across 24 fron­tier mar­kets.

Twenty-two of 24 African cur­ren­cies tracked by Bloomberg have lost ground against the dol­lar as the Fed­eral Re­serve pre­pares to raise rates.

To Mar­lon Chig­wende, sub-sa­ha­ran Africa man­ag­ing di­rec­tor for Car­lyle, the world’s sec­ond-largest pri­vate-eq­uity firm, the mes­sage is sim­ple: Africa is not a coun­try.

On his part, MMB Man­ag­ing Di­rec­tor Tom Mpedi said the pro­ject aimed to har­ness the skills of young peo­ple to en­sure the es­tab­lish­ment of sus­tain­able busi­nesses.

“This group of young men and women man­aged to con­vince our judges that there is some­thing within them that can be tapped and should be sup­ported for the bet­ter­ment of their lives and the econ­omy of the coun­try,” said Mr Mpedi.

“So far, they have been se­lected on the po­ten­tial of their ideas. They will un­dergo work within each of the 55 coun­tries that make up Africa,” he said. “There will con­tinue to be in­vest­ment op­por­tu­ni­ties.’’

The com­bined economies of subSa­ha­ran Africa should ex­pand 4.4 per­cent this year, the In­ter­na­tional Mon­e­tary Fund said in July. That’s one per­cent­age point less than pre­dicted a year ear­lier and be­low the 5.4 per­cent av­er­age of the last decade. The peak was 7.1 per­cent in 2007.

The data is driven largely by Nige­ria and South Africa, which to­gether ac­count for 55 per­cent of the 48 sub-sa­ha­ran African na­tions’ gross do­mes­tic prod­uct. A col­lapse in oil prices saw growth in Nige­ria slump to 2.4 per­cent in the sec­ond quar­ter, the slow­est pace in at least five years. South Africa’s econ­omy con­tracted by an an­nu­alised 1.3 per­cent as power short­ages curbed out­put.

“It’s about the weak­ness of the giants,’’ said Akinwumi Adesina, pres­i­dent of the African De­vel­op­ment Bank. He spoke from Abuja, Nige­ria’s cap­i­tal. “The coun­tries Africa ex­ports to have slowed down sig­nif­i­cantly.”

Bright spots re­main: Demo­cratic Re­pub­lic of Congo is ex­pected to be Africa’s top per­former this year, forecast by the IMF to grow by 9.2 per­cent, fol­lowed by Ethiopia, with a pro­jected ex­pan­sion of 8 per­cent. Congo is emerg­ing from a decade of train­ing which will leave no stone un­turned in teach­ing them how to plan a busi­ness prop­erly and show­ing the risks and op­por­tu­ni­ties of their busi­nesses.

“There­after, they will write their busi­ness plans for MMB’S con­sid­er­a­tion, with the pro­pos­als’ vi­a­bil­ity and po­ten­tial em­ploy­ment op­por­tu­ni­ties some of the fac­tors that would be con­sid­ered.”

He said it was also their in­ten­tion for the pro­ject to ben­e­fit en­trepreneurs from across the coun­try and not just from Maseru.

“The busi­ness ideas that have been pre­sented vary. They are in the fields of health, civil war, while Ethiopia is open­ing up to for­eign in­vest­ment and im­prov­ing its trans­port links.

Be­sides Nige­ria, the com­modi­ties rout has hit oil pro­duc­ers such as An­gola and Ghana, as well as Zam­bia, the con­ti­nent’s sec­ond-big­gest cop­per pro­ducer. The price of Brent crude has plum­meted 51 per­cent over the past 12 months, while cop­per has slumped 22 per­cent on the Lon­don Me­tal Ex­change.

“In­vestors that look for risk-ad­justed re­turns will con­tinue to look at the con­ti­nent, but they’ll cer­tainly have to tem­per their ex­pec­ta­tions,” said John Mackie, head of Johannesburg-based Stan­lib As­set Man­age­ment’s Pan-african In­vest­ment port­fo­lios. The pos­si­bil­ity of U.S. in­ter­est-rate in­creases and China’s fail­ure to curb its stock slump are man­u­fac­tur­ing, con­struc­tion, food, tech­nol­ogy, ma­chin­ery, fi­nance, cloth­ing, arts, farm­ing and media,” Mr Mpedi said.

“Un­like the first edi­tion, we have can­di­dates from dis­tricts other than Maseru such as Qacha’s Nek, Mokhot­long, Butha-buthe, Mo­hale’s Hoek, Mafeteng, Berea and Leribe.

“Our hope is that in fu­ture all the dis­tricts can be rep­re­sented in a pool of can­di­dates who are se­lected. Ba­sotho youth should not feel like the only way they can pros­per is if they live in the cap­i­tal city of Maseru. There is a lot that can be done in the other parts of the coun­try as well.” hav­ing “a mas­sive im­pact.”

Mark Mo­bius, the Franklin Tem­ple­ton In­vest­ments money man­ager who’s been in­vest­ing in emerg­ing mar­kets for more than four decades, re­mains op­ti­mistic.

“The growth sce­nario is still ex­cel­lent,” he said in an e-mailed re­sponse to ques­tions. “We do not want to scale back our in­vest­ments. The prob­lems are here to stay but they pale be­side the op­por­tu­ni­ties.”

Shoprite Hold­ings Ltd., Africa’s largest re­tailer, is among com­pa­nies ben­e­fit­ing from a con­sumer spend­ing surge: Its su­per­mar­ket sales out­side South Africa, its home base, grew 13.5 per­cent in the year through June. The com­pany has out­lets in 15 African na­tions, in­clud­ing the Demo­cratic Re­pub­lic of Congo, An­gola, Le­sotho, Nige­ria and Uganda.

“There are coun­tries that con­tinue to do well,” Christo Wiese, Shoprite’s bil­lion­aire chair­man, said in an in­ter­view. “Tak­ing a medi­umterm view, you ig­nore Africa at your peril.”

Most African coun­tries are net com­mod­ity im­porters and should ben­e­fit from lower prices, ac­cord­ing to Mark Bohlund, an economist with Bloomberg In­tel­li­gence in Lon­don. Ethiopia and Kenya, which are mak­ing progress on build­ing in­fra­struc­ture, stand to gain while ex­porters An­gola and Nige­ria will grow less, he said.

Top­ping the list of Africa’s in­fra­struc­ture con­cerns is a power short­fall. An es­ti­mated 600 mil­lion Africans lack ac­cess to elec­tric­ity. While about 95 energy projects worth more than $50 mil­lion were be­ing built in Africa last year, most are nowhere near com­ple­tion, ac­cord­ing to a study by Deloitte LLP.

“Africa should’ve been grow­ing at 7 or 8 per­cent if it had sorted its power out a decade ago,” said David Cowan, an Africa economist in Lon­don at Cit­i­group Inc. Even given sound eco­nomic fun­da­men­tals in many coun­tries, “The Africa-ris­ing nar­ra­tive was just an over­sold story.” — Bloomberg

SHOPRITE sales out­side South Africa grew 13.5 per­cent in the year through June.